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Israel abolishes split between infrastructure and service suppliers

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Minister of Communications, Yoaz Hendel, has confirmed that Israel is to abolish the split it imposed between infrastructure providers and internet service suppliers.

Hendel's ruling, confirmed on 20 June, will take effect from March 2022, not only changing the structure of the market, but leading to a "significant improvement" in the quality of services to consumers.

The ministry said its process of transitioning to the new regulation will be gradual, with the aim of "strengthening wholesale market mechanisms". 

Hendel said: “In October 2020, as a Minister in the 35th Government of Israel, I announced the intention to abolish the split between the infrastructure and the Internet service supplier as a means of improving the service – A hearing was launched and the process was carried out until the elections were held. Currently, after the political crisis and the formation of a permanent government, we are closing the circle.

"This is one of the first decisions to be made because its impact on the pockets of Israeli citizens and the service they will receive is enormous – the internet is one single product and the split has caused confusion on the part of the customers with the customer running back and forth between supplier companies in the event of a malfunction."

Services and infrastructure were first split to promote competition following Bezeq's privatisation in the 1990s. However since then it has created what the ministry called "the phenomenon of dormant subscribers”. According to estimates, this costs consumers about NIS 50 million in excess payments each year, for a product they did not use. 

Hendel's department said it believes that it is "time to end the supplier - infrastructure model that has run out of competitive steam", and instead to encourage competition through the wholesale market.

Existing customers who wish to continue consuming internet services in a split manner will be permitted to do so, however, new customers will be allocated to the unified service only. 

Regulators reformed Israel’s wholesale market in 2015, ordering Bezeq to open up its telephony infrastructure to competitors. The company appealed against the decision but was ordered by regulators to go begin making wholesale services available. Then in 2019, Bezeq was hit with a $3 million fine from the regulator over its failure to sell wholesale telephony services to rivals.